By Ryan C. Wood
As anticipated, the Chapter 9 bankruptcy filing of the City of Harrisburg came to a crashing end under the pile of motions to dismiss and Pennsylvania state law that still arguably prohibited the bankruptcy filing. The bankruptcy court entered the order of dismissal on November 23, 2011. The deadline to appeal the order of dismissal without an extension of time was December 7, 2011. The council members that originally filed bankruptcy on behalf of the City of Harrisburg filed their notice of appeal on December 10, 2011, three days late. Then on December 11, 2011, a day later, the council members filed a motion seeking an order to extend the time they had to appeal the order of dismissal given that they filed their notice of appeal three days late. On December 13, 2011, the bankruptcy court denied the city councils request to extend the time to appeal and struck the notice of appeal from the record. The bankruptcy court provided that counsel for the City Council of Harrisburg new the basis of the bankruptcy court’s decision to dismiss the bankruptcy case and received the written opinion two days prior to the deadline to appeal. The failure to timely file the notice of appeal was not excusable neglect, but inexplicable and unjustifiable.
If the appeal is still allowed to move forward, which is still possible, it will challenge the bankruptcy court’s ruling in support of upholding a state’s right to legislate and control cities within its jurisdiction. Prior to when the City of Harrisburg filed for bankruptcy the State of Pennsylvania had passed a state law forbidding a city classified like Harrisburg from being able to file bankruptcy under Chapter 9 of the bankruptcy code.
There still could be a titanic clash of state law versus federal law if there is still a successful appeal and the appellate court choses to take a different position then the bankruptcy court. The bankruptcy court rejected arguments that the Pennsylvania state law prohibiting Harrisburg from filing bankruptcy violated the Supremacy Clause or 14th Amendment of the United States Constitution. The bankruptcy court also rejected the arguments that Pennsylvania state law prohibiting the filing of the bankruptcy petition violated the Pennsylvania Constitution.
Issues of federalism have come up time and time again regarding the federal government’s ability to govern and make individual states follow federal law. The Tenths Amended provides that powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively. Under the federal bankruptcy code municipalities can file for bankruptcy protection, but only with state authorization.
Ultimately the bankruptcy court held that the city council members of Harrisburg did not have the authority under Pennsylvania state law to commence the bankruptcy case on behalf of Harrisburg and Harrisburg is not authorized to under Pennsylvania state law to be a debtor under Chapter 9 of the bankruptcy code.
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